On behalf of Michael Brooks of Law Offices of Michael A. Brooks posted in commercial real estate on Thursday, August 16, 2018.
Whether you are just tired of the responsibility of being somebody’s landlord or you inherited a rental home, you can’t always wait until a rental is empty in order to sell. That makes it important to know your options when it comes to putting a property on the market.
What are your legal obligations to your tenants when you decide to sell?
The answer largely depends on what type of rental agreement your renter is currently under. A renter with a month-by-month agreement generally has fewer rights than a renter with a fixed lease. Here are some guidelines you can use.
1. Determine what type of lease your tenant holds
You may or may not be aware of the type of lease your tenant holds (especially if you just inherited a property). Review the lease to determine whether or not the tenant has a month-by-month contract or a fixed-term one.
2. Decide if you have the ability to clear the property
Selling an empty property is generally easier than selling one with a tenant still living in it. For your purposes, it’s better if you can end the lease and then put the property on the market.
If the tenant is on a month-to-month contract, you need to give a 30-day notice to vacate. If the tenant is on a fixed-term contract, you will have to decide whether you can wait until after the lease expires to sell. Keep in mind, it may be possible to terminate the lease early if your property is occupied by a “problem” tenant. You can review the terms of the lease for violations and initiate eviction proceedings — although that does put you through more effort and expense than simply waiting out the lease.
3. Consider an offer to the resident of cash to buy out their lease
If you don’t have any way to terminate a lease early, you may be able to broker a deal with your tenant. Consider offering two months’ rent plus moving costs — enough for the tenant to start over somewhere else without significant expense. That may be cheaper (and quicker) than an eviction.
If all else fails, you can still sell the rental contract with the property — although that does mean finding a buyer who is willing to assume the lease.
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